Corporate Accountability and Human Rights: Aligning South African Business Practices with Constitutional Values
August 18, 2023
Corporate Commercial Law
Dormant Companies And The Deregistration Process In Terms Of The Companies ACT Of 71 Of 2008
A number of companies in the country have been hit with penalties for outstanding tax returns over the years. This is because if you registered a company with the Companies and Intellectual Property Commission (“CIPC”), even if your company is not trading, you still have a duty to submit the company’s tax returns to the South African Revenue Service (“SARS”).
There are two ways available to deregister a company, whether your company is dormant or it’s still trading. A company can be deregistered either automatically by failing to file its annual returns with the CIPC, or voluntarily by making an application to the CIPC to be deregistered.
Automatic Deregistration Of Companies
Section 82 (3) of the Companies Act 71 of 2008 (“the Act”) is concerned with the deregistration process and the removal of companies from register and provides as follows:
“…the Commission may otherwise remove a company from the companies register only if –
(a) the company has transferred its registration to a foreign jurisdiction in terms of subsection (5), or –
(i) has failed to file an annual return in terms of section 33 for two or more years in succession; and
(ii) on demand by the Commission, has failed to –
(aa)give satisfactory reasons for the failure to file the required annual returns; or
(bb)show satisfactory cause for the company to remain registered; or
b) the Commission –
(i) has determined in the prescribed manner that the company appears to have been inactive for at least seven years, and no persons has demonstrated a reasonable interest in, or reason for, its continued existence; or
(ii) has received a request in the prescribed manner and form and has determined that the company –
(aa) has ceased to carry on business; and
(bb) has no assets or, because of the inadequacy of its assets, there is no reasonable probability of the company being liquidated.”
Even though the above section provides that the deregistration process may begin automatically, you still have an obligation to check with the CIPC to determine if your company has been successfully deregistered.
Voluntary Deregistration Of Companies
For voluntary deregistration, it is crucial to have up-to-date annual returns. You will need to notify SARS that your company is tax complaint and to deregister the company from their system. Please note that SARS will not deregister the company from their system until it has been proven that the company is tax compliant.
Steps to follow
- Check on SARS eFiling to see if there are any outstanding tax returns for your company.
- Submit all outstanding tax returns to SARS and request the Tax Compliance Status.
- File the company’s outstanding income tax returns even if it did not conduct any business.
- Once this process has been completed, you will need to prepare a submission for CIPC for voluntary deregistration.
- You will need to write a deregistration letter on your company letterhead, with the following information – date, company name and registration number, company tax number, explaining dormancy status, you need to state out that the company has no assets, provide that the company is not being liquidated, provide reasons why the entity did not file annual returns, clearly indicate that you need the status of the company to be changed to voluntary deregistration. The letter needs to be signed by at least 50% of the active directors or members.
- Lastly, you will need to submit the letter, the tax clearance certificate and a certified copy of the ID of the person signing the request. Send the letter and other supporting documents to deregistrations@cipc.co.za.
Effect Of Removal Of Company From Register
In terms of section 83 of the Act, a company is dissolved as of the date on which its name is removed from the companies register. This means that the legal persona of the company ceases to exist. The company will therefore no longer be able to trade, do business and enter into agreements. In addition to this, any liabilities of the company are not enforceable. However, this does not affect the liability of any former director or shareholder of the company in respect of any omission that took place before the company was removed from the register.
In an event where a creditor wishes to sue a company that is in the process of being deregistered or that it has been finally deregistered. Section 83 (4) of the Act is applicable and provides as follows:
“(4) at any time after a company has been dissolved –
(a) the liquidator of the company, or other person with an interest in the company, may apply to a court for an order declaring the dissolution to have been void, or any other order that is just and equitable in the circumstances; and
(b) if the court declares the dissolution to have been void, any proceedings may be taken against the company as might have been taken if the company had been dissolved.”
In accordance with the above provision, the court thus has the power upon application by the liquidator or other interested party to set aside a dissolution in terms of a voiding order. This is usually done to complete unfinished business or to rectify an oversight in relation to a winding-up, such as the distribution of one or more of the company’s assets that had been overlooked in the final process.
Where a company is deregistered while it is still in possession of fixed or moveable assets. After the deregistration of the entity, all assets that it may have owned immediately prior to its deregistration, passes to the State as bona vacantia (meaning property without an owner). This position was confirmed in the Miller and Others v Nasfcos Investment Holdings Co Ltd and Others 2010 (6) SA 390 (SCA) case, where the court stressed that the effect of deregistration of an entity is that its existence as a legal person ceases and that all its property, movable or immovable passes automatically into the ownership of the State.
Contact Us
At MVR Attorneys we have extensive experience in company law and our professional team is well equipped to handle any company administrative matters. If you would like to have your company deregistered or require assistance on any other company law related matters, please do not hesitate to contact us on 010 012 6675 or reach out via email tana@mvrlaw.co.za
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